Foundations of Business and Company Law: US, UK, Italy and the European Context by Sabrina Bruno

Author:Sabrina Bruno [Bruno, Sabrina]
Language: eng
Format: epub
ISBN: 9783031718854
Google: W7A0EQAAQBAJ
Publisher: Springer Nature

All the shareholders’ proposals were rejected at the general meeting.

4.3.9.2 Voting Mechanisms at General Meetings and Proxies

Voting mechanisms at general meetings may vary depending on state legislation and on the certificate of incorporation or bylaws. In addition, they vary depending on whether the resolution refers to the election of directors or to other items on the agenda (even if all these items are voted upon during the same general meeting).

With reference to directors’ election, shareholders can vote either FOR or WITHHOLD (i.e., voting AGAINST is not allowed). Moreover, there are two mechanisms generally used by listed corporations: plurality and majority.

The plurality voting mechanism means that a director may win if she/he acquires the most votes cast. But withheld votes are not cast or counted. Assume the quorum is 500; even if a director is voted FOR by 100 and 400 WITHOLD their votes, he/she wins. If the majority voting mechanism applies, a director wins if she/he acquires the majority of the quorum (250 + 1 out of 500).

With reference to nonlisted companies, there is a third possible voting mechanism—cumulative voting—that improves the likelihood of minority representation on the board. If this mechanism applies, each shareholder gets votes equal to the number of shares owned multiplied by the number of seats to be filled.

Example of the Cumulative Voting Mechanism

Corp. J has 300 shares and two shareholders; shareholder A owns 199 shares, and shareholder B owns 101 shares. Corp. J has a three-person board elected to annual terms. If the majority voting applies, A would win each seat 199–101. If the cumulative voting applies, B casts 303 shares all for one candidate (who will be guaranteed to get one seat on the board) because A’s 597 votes cannot be divided three ways so that all three are greater than 303.

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